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First instalment of Fifteenth Finance Commission Grants to Rural Local Bodies (RLBs) released

The Fifteenth Finance Commission (XV FC) has submitted its interim report for the period FY 2020-21 and the Government of India has accepted its recommendations in respect of the Local Bodies. Stating this, Union Minister of Agriculture & Farmers’ Welfare, Rural Development & Panchayati Raj, Shri Narendra Singh Tomar said that the Commission has worked out the total size of the grant to be Rs.60,750 crore for the period FY 2020-21 which is the highest ever allocation made by the Finance Commission in any single year.

The Commission has recommended Grants-in-aid to all tiers of the Panchayati Raj including the Traditional Bodies of Fifth and Sixth Schedule areas, in 28 States, in two parts, namely, (i) a Basic Grant and (ii) a Tied Grant. 50 % of the grant will be Basic Grant and 50 % will be the Tied Grant. The basic grants are untied and can be used by RLBs for location-specific felt needs, except for salary or other establishment expenditure. The Tied Grants are to be used for the basic services of (a) sanitation and maintenance of open-defecation free (ODF) status and (b) supply of drinking water, rain water harvesting and water recycling. The RLBs shall, as far as possible, earmark one half of these Tied Grants each to these two critical services.  However, if any RLB has fully saturated the needs of one category it can utilize the funds for the other category.

The State Governments will be distributing the XV FC Grants to all the tiers of panchayats – village, block and district and the traditional bodies of Fifth and Sixth Schedule areas based on the accepted recommendations of the latest State Finance Commission (SFC) and in conformity of the following bands recommended by XV FC.

•           70-85 % for village/gram panchayats

•           10-25 % for block/intermediate panchayats

•           5-15 % for district/zilla panchayats

•           In states having two-tier system with only village and district panchayats, the distribution will be in the bands of 70-85 % for village/gram panchayats and 15-30% for district/zilla panchayats

The intra-tier distribution among the relevant entities in a tier across the State (including Fifth and Sixth Schedule areas) will be on the basis of population and area in the ratio of 90:10 or as per the accepted recommendations of the latest SFC.

Giving further details, Shri Tomar said that upon the recommendations of Ministry of Panchayati Raj, an amount of Rs.15187.50 crore, as grants-in-aid, in respect of 2.63 lakh Rural Local Bodies (RLBs) spread in 28 States of the country has been released by the Ministry of Finance on 17th June, 2020. This grants-in-aid forms part of the Untied Grant as recommended by Fifteenth Finance Commission (XV-FC) for the period FY 2020-21 and is to be used by RLBs for the location-specific felt needs.

Shri Narendra Singh Tomar disclosed that to facilitate taking up of various developmental work concerning supply of drinking water, rain water harvesting, water recycling, sanitation and maintenance of ODF status by the RLBs another installment of Rs.15187.50 crore as tied Grants is expected to be released shortly by the Ministry of Finance for which Ministry of Panchayati Raj has already made its recommendations.

Shri Tomar said that the release of this fund to the RLBs signifies the most appropriate timing when the RLBs are fighting the challenges posed by the COVID-19 pandemic situation. No doubt, availability of this fund with the RLBs will boost their effectiveness in delivery of basic services to the rural citizens and would also empower them in providing gainful employment to migrant laborers who have returned to their native places owing to Covid-19 pandemic situation as well as in augmenting rural infrastructure in a constructive way.

The Union Minister of Rural Development & Panchayati Raj said that with a view to provide employment to persons in rural areas as per their skill sets and also to strengthen community infrastructure to enable GPs to effectively meet the challenges, Government of India has decided to permit utilization of 50% of the cost of Panchayat Bhawan through Finance Commission funds and 50% of the cost from MGNREGS funds out of the total approved unit cost of Rs.20 Lakh. In case the available unspent balance under 14th Finance Commission grants available with Gram Panchayats is insufficient to meet the 50% cost of Panchayat Bhawan, the deficit may be met by utilizing the ‘untied grants’ portion of the 15th FC untied grants during 2020-21.

In addition, the GPs may also undertake repair and maintenance of other Public Buildings/Assets located in the Gram Panchayat such as Primary/Upper Primary Schools, Health Sub Centres, Cooperative Stores selling seeds and fertilizers etc where required by utilizing the Finance Commission Grants. GPs may also endeavour to converge Finance Commission funds with MGNREGS for taking up other works which are permissible such as those for the SHG collectives at village level (maximum cost limit –Rs 15 Lakhs). A detailed joint letter of Secretary, Ministry of Panchayati Raj and Ministry of Rural Development has been addressed to the Chief Secretaries in this regard, and copy of the same is enclosed for reference.

It would be quite appropriate to highlight that during the COVID-19 pandemic situation, in various parts of the country, the RLBs have implemented a range of preventive and protective measures in an effective manner, including the setting up of nearly 38,000 isolation centers in rural areas, development of IEC materials and awareness initiatives, sanitization by spraying disinfectants, appointing village volunteers for COVID disease management, enforcing social distancing, organizing medical camps, tracking the movement of people coming from outside areas and ensuring their stay at Quarantine Isolation Centers for the stipulated quarantine period, door to door campaign for awareness, hand washing campaigns, involvement of SHGs in making masks, providing relief to migrant workers and jumpstarting MGNREGS works to provide local employment. The role of Panchayats assumes further significance in view of the recent large scale return of migrant labor to their respective villages.

The Ministry of Panchayati Raj would actively support the States in effective utilization of the XV FC Grants by providing Web/IT enabled platforms for planning, monitoring, accounting / auditing of the works and funds flow at the level of each of the RLBs.